Archive for July, 2011

Amending the “interest” claimed in a caveat

Mistakes are often made in describing the interest claimed in a caveat. Is it possible to amend the caveat to claim the correct interest? Macaulay J considered this issue in Percy & Michele Pty Ltd v Gangemi [2010] VSC 530. where the interest claimed was “estate in fee simple” when it should have been “an equitable interest as a chargee”. The power to amend a caveat is derived from the discretionary power in s.90 of the Transfer of Land Act 1958 for the court to “make such order as the court thinks fit”. After considering Midwarren Estates Pty Ltd v Retek and Stivic [1975] VR 575 where Menhenitt J was of the view that s.90(3) did not authorise an amendment of the estate claimed, His Honour said at [101]:

“Having referred to these authorities, and canvassed these views, I do nonetheless recognise that the power expressed in s 90(3) is wide and unqualified. Ultimately, the better view may be that although the power is to be construed as being wide enough to amend the estate or interest claimed, in appropriate circumstances, nevertheless when exercising its discretion the court should generally be less inclined to amend the interest or estate claimed than to amend the grounds of the claim or the scope of the protection asserted.”

In refusing the appliation to amend the interest claimed His Honour at [104]-[105]  identified four factors relevant to the exercise of the discretion: 

(a)    the amendment sought is to the interest claimed and not just the grounds of claim or the scope of the protection;

(b)    the circumstances in which the error was made;

(c)   the court should not readily act in a way which might encourage the belief that caveats can be imprecisely formulated and then “fixed up later”; caveats act as an interlocutory injunction (albeit by an administrative act) and can have powerful and serious consequences; wrongly formulated caveats should not easily be tolerated;

(d)    the overall merits of the claim for a caveatable interest of the kind which is sought by the amendment; in other words, it should have regard to all of the same considerations which arise on the application of removal for a caveat in the terms sought.

His Honour refused the application.

See also Martorella v Innovision Developments Pty Ltd [2011] VSC 282.

 

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Deemed assignments and landlord’s consent

Leases commonly deem there to be an assignment of the term of the lease if change in the principal shareholding of the tenant or the directors of the tenant takes place that that alters the effective control of the tenant. The landlord’s written consent is usually required to such an assignment. If there is a term in the lease that excludes the operation of s.144 of the Property Law Act 1958 the following question arises:  does the landlord have an absolute right to refuse consent or is it subject to any dutiesin considering whether to grant or withhold consent to the assignment? In Lindholm v Tsourlinis Distributors Pty Ltd [2011] FCA 195 Finkelstein J held at [49] that a landlord in considering whether to grant or withhold consent is “bound to act in good faith”.

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What is a ‘tenant in possession”: s42(2)(e) of TLA

In Victoria a purchaser of land takes the land subject to “the interests of a tenant in possession of the land”. See: s.42(2)(e) of the Transfer of Land Act 1958.  The section protects a person who is in actual occupation of the land. Finkelstein J said the following  in  Money for Living (Aust) Pty Ltd (Administrators Appointed) v Money for Living (Aust) Pty Ltd (Administrators Appointed) (No 2) [2006] FCA 1285 at [24]–[25]:

“…..The effect of s 42(2)(e) is that the estate of a registered proprietor of land (including the proprietor of a mortgage) is subject to the rights of a tenant in possession. In this area the relevant principles are clearly established. The first is that the possession of a tenant is notice of any right of the tenant affecting the land: McMahon v Swan [1924] VLR 397 at 406. The second is that, as Dixon J confirmed in Burke v Dawes (1938) 59 CLR 1 at 17–18, s 72 of the Transfer of Land Act 1928 (Vic) (which is the forerunner of s 42) was not intended to apply merely to a tenancy as commonly understood. See also Downie v Lockwood [1965] VR 257 at 259 where Smith J said “As appears from the cases the exception in s 42 (2) (e) is to be widely construed; and it is to be treated as producing the result that “any person in actual occupation of the land obtains as against any inconsistent registered dealing protection and priority for any equitable interest to which his occupation is incident, provided that at law his occupation is referable to a tenancy of sort, whether at will or for years”. Thus, for the purposes of the section a purchaser under a contract, who is given possession by the vendor and is only a tenant at will, is protected in respect of his equitable ownership: Robertson v Keith (1870) 1 VLR(E) 11. So, too, is a vendor who remains in possession until the purchase price is paid: he is a tenant “whatever might be the legal denomination of the tenancy”: The Commercial Bank of Australia Limited v McCaskill (1897) 23 VLR 10 at 12. It has also been held that an equitable life estate will prevail over a subsequent registered interest: Black v Poole (1895) 16 ALT 155.”

(See also Haslam v Money for Living (Aust) Pty Ltd [2008] FCA 1536 at [19])

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s.42(2)(e) of Transfer of Land Act 1958

Traditionally leases in Victoria have not been registered because of the protection afforded by s. 42(2)(e) of the Transfer of Land Act 1958 which provides that :

“….land which is included in any folio of the Register or registered instrument shall be subject to –

…..

(e)   the interests of (but excluding any option to purchase) of a tenant in possession of the land;”

Because of s.42(2)(e) any purchaser of the relevant land was bound by the lease. The reference to “tenant in possession” means a person in actual possession of the land. See: Burke v Dawes (1937-38) 59 CLR 1 at 17-18;  Balanced Securities Ltd v Bianco [2010] VSC 162 at [79].

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Section 146 notices

There is a common misconception that receipt of a valid notice under s 146(1) of the Property Law Act 1958 requires the tenant to rectify the defaults alleged   within the time specified.  The purpose of a notice is to give the tenant an opportunity to consider its position and give a response: See: Primary RE Limited v Great Southern Property Holdings Limited [2011] VSC 242 [147]. If the breach is capable of remedy, an adequate response may be to admit the breach and propose a course of remediation. See: Primary RE [147].  In Primary RE the tenants had failed to comply with lease and forestry agreements. At [132] Judd J said that a “sufficient response” by the tenant to the notices would have been to undertake to recommence management of the plantations and perform its obligations under each lease and to agree to pay compensation for any damage to the reversion. At [147] His Honour said:

 “…having received the noticed of default, a sufficient response from the tenant to avoid forfeiture, re-entry or termination, would have been to recommence management of the plantations in compliance with its obligations under each lease and forestry agreement, coupled with a proposal to pay reasonable compensation for any injury to the reversion. In my view it would not have been necessary for the tenant to do more in order to avoid the risk of termination, provided the tenant had the capacity and communicated a genuine intention to do as proposed. Nothing of the kind was communicated by the tenant to any of the landlords. The fact that the remediation work, identified in the notices, might take one or more years was not a determining factor in the calculation of a reasonable time within which to respond.”

As to what is a “reasonable time” for the lessee to respond to a statutory notice, Judd J said at [140} that this “depends upon the purpose for which the notice is given, the nature of the breaches alleged and what is required to be done to avoid forfeiture”.  A reasonable time is not the time necessary to actually undertake the work.

 The reference in s 146(1)  “compensation”  is directed to loss suffered as a consequence of damage to the reversion and is not “intended a substitute for remediation” ([133]). The landlord need not specify in the statutory notice the amount of “compensation” necessary to satisfy the demand.

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The fog is beginning to clear

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Section 52 of the Retail Leases Act 2003 implies into a lease a term that the “landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into:

“(a)      the structure of, and fixtures in, the retail premises; and

(b)      plant and equipment at the retail premises; and

(c)      the appliances, fittings and fixtures provided under the lease by the landlord relating to the gas, electricity, water, drainage or other services.

The section was considered in  Computers & Parts Land Pty Ltd [2010] VCAT 2054 where it was held that a landlord was not required to maintain premises in “state of disrepair” that was “identical” to the state of disrepair when the lease was entered into; the state of repair “need not be any better than at the commencement of the lease” but had to be “the same benefit to the lessee as was agreed to be provided by the demise” (para [75]).  Section 52 was a “keep in repair” obligation as opposed to a “put in and keep in repair” obligation (paras [84] and [85]). The expression “keep in repair”:

“…could mean, in extreme circumstances, that the only course open to a landlord is to replace some aspect of rented premises, but only to the degree that it is necessary to give the tenant the same conditions as at the commencement of the tenancy.”

If parts failed they had to be replaced with replacement parts that  “in the absence of adequate second hand parts, might need to be new” (para [85]). While s 52 did not mandate compliance with any legislative standard, a landlord could not contravene “a building or related law or regulation” and if there were an “aspect of the building that was legal at the date of its construction but is no longer legal, repair of that aspect of the building would not be a betterment for the Tenant.”(para [88]).

The Tribunal rejected contentions that a landlord had to re-design an air conditioning system to remove design flaws or anomalies (para [90]) and replace the  system with one that operated better than the original system (para [96]) but accepted that there might be circumstances where a roof had to be replaced rather than repaired if it were to survive the duration of the tenancy (para [127]).

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

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Is a purchaser of land bound by covenants in a lease?

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When premises are sold the question often arises as to whether a tenant can enforce  covenants contained in the lease against the new owner?

At common law, unaffected by statute, an assignee of the reversion is not bound by any of the covenants and conditions of the lease. See: In re Hunter’s Lease [1942] 1 Ch 124 at 128.

In Victoria, s 142 of the Property Law Act 1958 altered this position and an assignee of the reversion is bound by covenants contained in the lease that “touch and concern” the land.

In Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2010] VSC 44 Croft J held that a restraint of trade clause contained in a lease did not “touch and concern” the leased land and therefore did not bind the assignee of the reversion.

The case contains a detailed analysis of the type of covenants that “touch and concern” land (see [52] – [67]). In broad terms any covenant that affects the landlord as a landlord or the tenant as a tenant will probably be within the class of covenants that touch and concern the land.

 

See: Bradbrook, Coft & Hay Commercial Tenancy Law, 3rd ed, paragraph 15.20, p. 483.

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

 

 

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What is the effect of a nominee clause?

There is a translation key (widget) on the mirrored blog for ease of reading for non-English speaking members of the public or professionals. The mirrored blog can be found at  http://roberthaybarrister.blogspot.com.au/

 

What is the effect of a purchaser of land nominating a nominee under a nomination clause contained in the contract: what rights and obligations does the nominee have?

The answer is none: the nominee has no contractual rights and no obligations.

In 428 Little Bourke Street Pty Ltd v Lonsdale Street Cafe Pty Ltd [2009] VSC 133 the vendor misrepresented the lettable area of the property. The purchaser nominated the plaintiff as purchaser. The director of the purchaser was also the director of the nominee. It was alleged that the nominee purchaser relied on the representations. The nominee clause  provided as follows:

“If the contract says that the property is sold to a named purchaser ‘and/or nominee’ (or similar words) the named purchaser may, at least 14 days before settlement date, nominate a substitute or additional purchaser, but the named purchaser remains personally liable for the due performance of all the purchaser’s obligations under this contract.”

The contract authorised a substitute or additional purchaser.

The nominee purchaser brought an action for damages based on a breach of s 52 of the Trade Practices Act, s 9 of the Fair Trading Act and for negligent misstatement.

Judd J held that that the nomination did not have the effect of a novation and the plaintiff did not become a party to the contract of sale.

His Honour also found that by the time the plaintiff paid the purchase price and took the conveyance it was aware of the true lettable area of the property.

Thus, the cause of the plaintiff’s loss was either an informed choice to pay a price for the property and take the conveyance or, if the payment was involuntary, it was because the plaintiff was caused by its directors, in full knowledge of the true facts to make the payment in which case but for the nomination it would not have suffered any loss.  The loss was caused by the nomination – not the representations.  Judd J dismissed the proceeding.

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

 

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Property Law ( Sale of Land) – Everything must be in writing

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It is extraordinary how often lawyers overlook the cardinal rule when dealing with land:

anything intended to have legal effect must be in writing. See: s.53 of the Property Law Act 1958 and s.126 of the Instruments Act 1958.

 

The most overlooked rule appears to be that where an agent is to sign a contract or enter into an agreement that will affect an interest in land the agent must also be authorised in writing to sign the contract or enter into the agreement.

In Federation Properties Pty Ltd v Tzioras [2001] VSC 135 Byrne J held that a contract for the sale of land was unenforceable because the agent who made the contract had not been authorised in writing.

Lawyers settling court proceedings should be particularly careful about ensuring that they have written instructions to sign terms of settlement. See: Grummitt v Natalisio  [1968] VR 156; Collin v Holden [1989] VR 510.

 

land

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

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Section 52 – when is the lease “entered into”?

There is a translation key (widget) on the mirrored blog for ease of reading for non-English speaking members of the public or professionals. The mirrored blog can be found at http://roberthaybarrister.blogspot.com.au/

 

Section 52 of the Retail Leases Act 2003  is proving to be a difficult provision to apply. Section 52 implies into a retail premises lease a term that:

“The landlord is responsible for maintaining in a condition consistent with the condition of the premises when the retail premises lease was entered into –

(a)     the structures of, and fixtures in, the rental premises lease; and

(b)     plant and equipment at the retail premises; and

…..” (s.52(2))

When is the lease “entered into”?

If the tenant occupies premises for 5 years and exercises an option for a further 5 years what is the date at which the “condition of the premises” is assessed; at the commencement of the first term of 5 years or at the commencement of the second term of 5 years?  In Ross-Hunt Pty Ltd v Cianjan Pty Ltd [2009] VCAT 829 Deputy President Macnamara held that the relevant date was the date that the new term commenced following the exercise of an option.

The lesson for tenants is that a thorough assessment of the state of the premises should be undertaken when the tenant first occupies the premises; regular reviews of the state of the premises should also be undertaken during the term; and the landlord should be requested to undertake repairs during the term.

 

My clerk can be contacted via this link for bookings  http://www.greenslist.com.au/

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